The Basics of Insurance
Definition
In a simple meaning, insurance is a way to protect yourself or your assets from financial lost. It’s a contract between two parties where one party would pay for the loss of the other party caused by certain events agreed within the contract.How Insurance Works
The main principal of insurance is sharing losses. So if you want to be covered for your loss, you must agree to make regular payments, which are called premiums to the insurance company. The company will then give you a policy stating that they will cover with conditions as agreed in the policy.Types of Insurance
There are so many types of insurance, including some insurance bought to cover unusual “assets” like legs, breasts, nose, or lips that usually sold to celebrities. However, in general there are three kinds of insurance; Life insurance, Private health insurance, and Property & Liability insurance.1. Life Insurance
Life insurance guarantees that the insurance company will pay certain amount of money if the insured person dies. The payment can be done in a lump sum or with installments to the people named by the policyholder as the beneficiary. There are many different types of life insurance, including the one that also works like a savings account, so the policyholder can actually save money. This type of life insurance policy has a cash value and if needed, the policyholder can borrow money or exchange the policy for cash.2. Private Health Insurance
This is the type of insurance that will cover all or part of the medical care cost. Lately it has become quite popular as the cost of medical care keeps rising. Without health insurance a person can easily suffer a terrible financial hardship, especially when a serious illness that requires a long and expensive medication occurs.3. Property and Liability Insurance
This type of insurance is purchased by businesses and individuals to protect their assets from financial loss. Property insurance will cover financial loss of policyholders in case their assets are lost or damaged. While liability insurance will cover the financial loss of policyholders against third party liability.Financial Stability of Insurance Company
People buy insurance to manage risks related to financial losses. Insurance companies as the party who responsible for these losses in the end should have a good financial stability. That’s why it’s important to choose a good insurance company before you decide to buy insurance policy, to make sure all you are secured from any possible financial losses in the future.
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